China jails foreign sleuths

Chinese court sentences British and American investigators

A COURT in Shanghai sentenced a British corporate detective, Peter Humphrey, to two-and-a-half years in prison on August 8th for illegally obtaining private information on Chinese citizens. His American wife and business partner, Yu Yingzeng, was jailed for two years on the same charges. Mr Humphrey, 59, and Ms Yu, 61, were arrested more than a year ago after they conducted an investigation on behalf of GlaxoSmithKline (GSK), a British pharmaceutical firm which is the target of an official inquiry into alleged corrupt behaviour in China (the authorities have not publicly linked the two cases). Chinese media say it is the first time foreigners have faced privacy-law charges.

The Shanghai Number One Intermediate People’s Court heard how the consultancy run by Mr Humphrey and Ms Yu, ChinaWhys, bought 256 items of private information between April 2009 and July 2013. ChinaWhys paid Chinese sources to provide identity documents, mobile phone numbers and travel records, among other items (see here, in Chinese, for transcripts of the proceedings). Mr Humphrey said the data were used in risk reports for foreign and domestic clients; most of them large or medium-sized manufacturing, finance or law firms.

Foreign companies in China commonly hire corporate investigators to vet potential partners or to unearth shady behaviour within their own ranks. In his closing statement, Mr Humphrey said he and his wife had lacked understanding of changes that were made to China’s privacy law in 2009. Earlier in the proceedings Ms Yu said she had not known the information they had obtained was illegal. After the trial the couple’s 19-year-old son Harvey Humphrey said: “I’m very sad about the court’s verdict but I hope the authorities would take into account their poor health”.

The verdict came as no surprise. After China Central Television, a state broadcaster, aired a confession by Mr Humphrey last August it was almost a certainty. (Televised confessions are becoming increasingly common in China.) In the video he appears handcuffed in prison-orange garb and apologises to the Chinese government. Mr Humphrey, a fluent Mandarin speaker and veteran of the Chinese business world, spent two decades as a foreign correspondent at Reuters news agency. He also worked at Kroll, a risk consultancy, and as head of Chinese investigations at another consultancy, PricewaterhouseCoopers.

Glaxo hired ChinaWhys in April last year to investigate the origins of an alleged smear campaign against Mark Reilly, who was then head of GSK’s China division (Reilly is among dozens of GSK employees being investigated.) At the same time Chinese regulators were receiving emails alleging widespread graft at the pharmaceutical giant. According to a note by Mr Humphrey published by the Financial Times, GSK assured him the allegations were unfounded. “Only after we completed our background investigation on the whistleblower did they reveal the details to us”, Mr Humphrey wrote.

His kind of business has never been more in demand in China, nor more difficult to conduct as privacy law is tightened. Chinese companies are busy forging business relationships overseas. But data on current or prospective partners are not easy for foreign firms to get. The case of Mr Humphrey and Ms Yu is likely to give pause to many foreign corporate-sleuths in China.